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Labour market reforms and employment hysteresis

Author

Listed:
  • Paulo R. Mota

    (School of Economics and Business, University of Porto, Rua Dr. Roberto Frias, 4200-464 Porto, Portugal
    Center for Economics and Finance, University of Porto, Portugal)

  • Paulo B. Vasconcelos

    (School of Economics and Business, University of Porto, Rua Dr. Roberto Frias, 4200-464 Porto, Portugal
    Center of Mathematics, University of Porto, Portugal)

Abstract

This paper analyses the effects of deregulation of employment in an environment of low interest rates and economic uncertainty. For this purpose, we estimate a switching employment equation based on the play model of hysteresis. As a novel feature, the estimation allows for a possible change in the value of the switching parameter after the implementation of labour market reforms. We use Portuguese monthly industrial data spanning from January 2000 to October 2016. Portugal provides a good case study since it is a country where significant measures towards the deregulation of the labour market were applied after the recent financial crisis. The results show that these measures reduced the hysteresis effects in the dynamics of aggregate employment except in the period where uncertainty increased substantially, when the opposite happened.

Suggested Citation

  • Paulo R. Mota & Paulo B. Vasconcelos, 2022. "Labour market reforms and employment hysteresis," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 72(2), pages 175-194, June.
    • Handle: RePEc:aka:aoecon:v:72:y:2022:i:2:p:175-194
    DOI: 10.1556/032.2022.00010
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    Cited by:

    1. Koray Yıldırım & Neşe Algan & Harun Bal, 2026. "Hysteresis in Unemployment: An Empirical Examination for the Turkish Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(2), pages 4233-4278, April.

    More about this item

    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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